The State of Technology Transfer at Princeton

When taking a tour of Princeton University today, one must notice the importance of research and recognize the symbiotic relationship between academia, the industrial sector, and the public. Today, it is evident, that the public is benefiting from the hard work of Princeton researchers. Such was not always the case.

At the dawn of the 1980s, the U.S. government was having difficulty moving federally funded research out of the lab and into the real world. In fact, in 1980, only 5 percent of government-funded patents were commercially applied. The inventions of researchers at Princeton and other American universities were being pushed into the dusty, shadowed corners of laboratories, where no member of the public would ever learn of or benefit from them. Clearly, the patenting and licensing system needed to be changed.

At the time, the policies differed between federal agencies, the government retained ownership of all inventions developed with federal funding, and the government gave non-exclusive licenses to anyone who wanted the invention once it was market ready. Thus, companies had no incentive to commercialize government-funded patents and universities had no incentive to apply for patents.

The Bayh-Dole Act, also called "The Patent and Trademark Act Amendments of 1980," changed everything. Bayh-Dole provided for the following:

• uniform policies throughout federal agencies,
• organizations that develop inventions would retain ownership,
• organizations would participate in the development and marketing of their inventions,
• government would retain non-exclusive license to practice their invention throughout the world, and
• small businesses would be given preference in licensing applications.

Since Bayh-Dole, the number of patent applications from government-funded research and the income from these inventions have increased dramatically in universities across the country. According to the Council on Governmental Relations, prior to 1981, fewer than 250 patents were issued to universities each year. In contrast, the Association of University Technology Managers reported that in 1999, 3,661 patents were issued to universities and a smaller number of nonprofit research institutions.

On the following five pages, we examine the state of technology transfer at Princeton.

Not quite 10 years ago, when Professor Steve Forrest was the newly appointed director of the Center for Photonics and Optoelectronic Materials (POEM), his long-time friend Greg Olsen was launching a company known as Sensors Unlimited Inc. (SUI). The company was not much more than an ambitious idea he shared with a handful of talented engineers, when Mr. Olsen turned to Princeton for a crucial partnership.

"When I founded Sensors Unlimited, I had people but not much money or equipment, while Steve was over at POEM with equipment and money but not many people,'' Mr. Olsen said.

Professor Forrest saw Sensors Unlimited as the key to bringing the energy and resources of product-oriented engineering to the education of SEAS students. He turned to Mr. Olsen and asked for a full-time engineer to help set up a clean room at POEM and teach students about semiconductor processing.

A key SUI employee, Mike Lange, became the first POEM engineer-in-residence. For the first 18 months of SUI's existence, its engineers worked intimately with engineering students at the POEM clean room, Mr. Olsen said. Last year, with little public notice, Princeton University, SEAS, POEM, and certainly Sensors Unlimited, passed a very significant milestone. SUI, a technology company that was all but born in the laboratories of SEAS, hit the financial big time. SUI was purchased for $700 million by Finisar Corp.

The sale is a testament to SUI's ascendancy to its position among the world's leading suppliers of optical components that monitor the performance of dense wavelength division multiplexing (DWDM) systems. It is also a coming-of-age for the University's efforts to expand the meaning of "Princeton in the nation's service,'' Professor Forrest said.

"Nothing is more in the nation's service, and the world's service, than what we are generating in our laboratories to benefit people's lives,'' he said. "Photonics have changed people's lives immensely in the past 10 years, and Princeton has played its role in that.''

The relationship between Princeton, or, more specifically of POEM and SUI is one of dozens of collaborative relationships between the University and private corporations, said John Ritter, director of the Office of Technology and Licensing.

Princeton researchers in departments as diverse as molecular biology, chemistry, physics, and even psychology and astrophysics have worked collaboratively with corporate partners, Mr. Ritter said. His office exists to protect the University's intellectual propietary rights to resulting technologies.

"Princeton has preeminent researchers in so many fields that I am dealing with technologies across the board, though the vast majority of technologies come from the engineering school,'' he said. (See graph, page 7.) Universities have always conducted the fundamental research that gives birth to new technology, and corporations have always searched for new products to bring to market.

The marriage of the two is taken for granted now but was all but forbidden prior to passage of key federal legislation in 1980. That law, known as the Bayh-Dole Act for its authors, Senators Birch Bayh and Bob Dole, made it legal for universities to retain patent rights to technologies resulting from federally funded research (see related story, page 7).

Prior to that, the federal government retained all rights to the results of research it funded, Mr. Ritter said. While there was logic to public ownership of technology resulting from publicly funded research, in practice the result was that the public saw few benefits, Mr. Ritter said.

"Remember the Indiana Jones movie where they put the Ark in the warehouse at the end?'' he said. "That's pretty much what happened with the technology that resulted from government-funded research. It went into the warehouse, and not much was done with it.''

There is plenty of evidence to suggest that the Bayh-Dole Act has had the intended result, according to the Association of University Technology Managers (AUTM). In a recent study, the association reported that since 1991:

• New U.S. patent applications filed by academic institutions increased more than threefold to 5,545 in fiscal year 1999.
• The number of licenses that academic institutions entered into grew threefold to more than 3,900.
• In fiscal year 1999, 344 new companies were formed with technologies licensed from academic institutions.
• Sixty-two percent of the licenses and options completed by academic institutions were with small entities, consistent with the intent of Bayh-Dole to encourage investment in product development by small companies.
• For fiscal year 1999, AUTM estimated that academic technology transfer resulted in $40.9 billion in economic activity, supporting 270,900 jobs.
• The business activity associated with sales of products in fiscal year 1999 is estimated to generate about $5 billion in U.S. tax revenues at the federal, state, and local levels.

To date, patents and technology licensing have not been big money-makers for Princeton, partly because the University has long been more wary of conflict of interests than it has been eager to generate new income, Mr. Ritter said.

"Other schools have been more aggressive in this effort and Princeton has been more conservative, but that is not a bad thing,'' he said. "There are many pitfalls that arise in terms of conflicts, and the university is rightly concerned with what the name Princeton University means to people. Nothing is worth tarnishing that name.''

While there are now dozens of cooperative research projects under way involving SEAS faculty and students with private companies large and small, Professor Forrest cites the relationship between POEM and SUI as the model for mutually beneficial research that has steered clear of conflicts on either side.

"The university's mission is education and generating new knowledge. A company's mission is to put black ink at the bottom of the ledger,'' he said. "If we get interested in putting black ink on the ledger, we've gone astray. And if they really take it into their hands to educate students, they are missing the boat as well.'' Close collaboration is essential to moving research results out of campus labs to produce public benefit, Mr.Ritter said.

"We have conflict of interest and conflict of commitment policies in place, but there is a tightrope to be walked,'' he said "While professors must not veer from their commitment to teaching and research, without their participation in start-up companies the technologies probably would never be developed into commercial products.'' Faculty interest in seeing their research applied is deep, Mr. Ritter said, which is why the University decided, with his hiring in 1996, to more assertively pursue patents and licensing.

"Our primary mission is to bring the benefits of research conducted here to the public. Our primary mission is not to generate money, although an ancillary benefit of the patenting of these technologies is to generate money,'' he said. "There are many professors who remain primarily focused on teaching and publishing but who want to see the fruits of their research reach the public. That is why they work with our office.''

The educational gratification enjoyed by students and faculty who see their work tangibly benefiting society is immeasurable but very real. Mr. Olsen said SUI's roots are permanently planted in Princeton. "We still meet for bagels every Thursday morning with Steve and his research team,'' he said. "Working with Princeton has given us intellectual capital, gifted students to hire, the opportunity to share research, and development equipment. The relationship with Princeton has been priceless for this company.''